Civil Society and Digital Free Trade: A Response

On October 6th a letter was circulated to the negotiators preparing for the World Trade Organization’s 11th Ministerial meeting (MC11), which will be held December 10-13, 2017 in Buenos Aires, Argentina. The letter purports to speak for all of “global civil society,” and singles out for attack the prospect of an agreement on e-commerce trade, which it calls “a dangerous and inappropriate new agenda.” A large part of the text appeared several months ago as part of a Huffington Post op-ed written by Deborah James, a Director at the anti-free trade Center for Economic and Policy Research, which is funded primarily by labor unions. In response to this letter, IGP wishes to make the following points:

Not the voice of “global civil society”

That statement is not the voice of “global civil society.” It is an alliance of labor unions primarily, with support from some anti-globalization environmental and church groups. While these are legitimate stakeholders who deserve to be heard, we wish to challenge the advocates’ pretense that consumers, civil society groups and the developing world all oppose free trade in e-commerce and only U.S.-based big corporations favor it and benefit from it.

There is a strong case to be made that free trade, while having complex distributional effects, improves consumer welfare overall and vitalizes developing economies. And it is hard to see why civil society should be defending protectionism and the associated regulations. They often stifle economic growth and are inevitably exploited by vested interests and corrupt government officials to enrich themselves at the expense of end users and consumers. We favor an open and honest debate about the merits of Internet-enabled trade in services, a debate that should be evidence-based and not based on the false polarity between “big corporations” and “the people.” Many in civil society support digital free trade.

E-Commerce trade

As participants in Internet governance, we disagree profoundly with the attack on free trade in e-commerce. The policies advocated in the statement – particularly data localization requirements and highly regulated cross-border data transfers – would reinforce current tendencies towards the political and technical disintegration of global communications. Whether intended or not, the statement’s opposition to open and competitive trade in e-commerce services lends support to the economic nationalism of China’s Xi, Russia’s Putin and America’s Trump. It is similar in logic to and motivated by the same spirit as the right-wing anti-immigration parties of North America and Europe. In Trump’s “wall,” in Brexit, in China’s “internet sovereignty” initiatives and Russia’s data localization law we are starting to see the effects of a more bordered information economy, and they do not look pretty.

Trade and human rights

In addition to their harmful economic effects, barriers to e-commerce can have severely negative effects on human rights. Data localization gives authoritarian governments easier access to user data for surveillance and law enforcement purposes. By denying Internet users the ability to access external email or web-based services, data localization rules can strengthen authoritarian states’ control over the internet and can even put dissident users’ lives at risk. While trade agreements all have shortcomings, various studies attest to the benefits of freer trade for protecting human rights and strengthening democracy.[1] Trade agreements can incentivize nation states that do not have appropriate data protection laws in place to pass legislation. Trade agreement negotiators, despite the allegations, have paid attention to privacy protection. There are relevant sections in TPP that require the parties to the agreement to protect personal information.[2] The negotiation of the Cross-Border Privacy Rules in the APEC countries was used by privacy advocates to improve privacy protections in cross-border e-commerce.[3] The potential contribution of trade agreements to enhancing rule of law and protecting digital rights have always been ignored by anti-trade civil society organizations.

Examples

Numerous case studies illustrate how restrictions on the market for ICT services stunt development and hurt consumers, and when these restrictions are eliminated developing economies benefit. Here are a few examples:

South Africa’s Telekom monopoly fought for years to keep competitors financed by foreign capital out of the market, so as to preserve their monopoly profits and labor union control of employment. When Telekom was given a 5 year monopoly in 1997, its prices were so high that telephone subscription rates declined. Lacking competitive incentives, it failed to expand service to new areas rapidly. In 2008 South Africa’s communications minister was involved in numerous legal battles to try to stop Internet service providers and other companies from building their own networks. The Telekom monopoly, the trade union confederation and the national regulator, ICASA, worked together to try to block entry of Vodacom into the market in 2009. Fortunately, the courts thwarted them. After new competition from foreign-financed or partially foreign-owned companies entered the market, interconnection fees and consumer prices fell, and internet and telecom development took place more rapidly.

In India, Internet service provider (ISPs) are not allowed to interconnect Voice over IP services to the public telephone network. This means that Internet-based calls cannot be mixed with traditional landline and mobile calls.The Telecommunications Regulatory Authority of India openly justifies this regulation on the grounds that it does not want users to bypass the telephone companies tolls; in other words, consumers pay millions more for service than they need to simply to protect the incumbent telephone company.

Mexico City, home to the largest taxicab fleet in the world, has seen violent confrontations between ride-hailing apps and official taxi drivers because the new competition has reduced prices for consumers. When the Association of Organized Taxi Drivers blocked streets in protest, the hashtag #UberSeQueda, or “UberStays,” became a trending topic on Twitter. According to a Wall Street Journal article, “Supporters of the alternative car services posted complaints against Mexico City’s notoriously aggressive taxi drivers, saying drivers will often tell passengers “I don’t have change,” “the taxi meter is broken,” or “I don’t go there.”” Clearly, what is seen as disruptive to the established taxi drivers is seen as improvement by many consumers and as better opportunity by the tens of thousands of new drivers who have been able to find a job. Mexico City also represents an example of how the new market entrants are expanding taxi service from urban to suburban areas, including less wealthy and historically underserved areas.

The facts about the WTO’s Information Technology Agreement (ITA) counter the statement’s distorted view that trade agreements subjugate developing economies to the needs of richer countries. The ITA completely eliminated most tariffs on ICT equipment. Studies show that joining the ITA spurs the adoption of productivity-enhancing ICTs across all sectors of an economy and that the growth and development benefits over time far outweigh the short-term loss in tariff revenues.[4] A long-term assessment shows that free trade increased the role of developing economies in global information technology production networks. The share of developing and emerging economies in the world trade of ITA goods grew rapidly over the period 1996-2015, at the expense of the mainly developed world signatories.[5]

It is time for global civil society organizations to break free of knee-jerk anti-market assumptions and look at the facts regarding digital trade.

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